Tourism industry loans likely to get 1-year moratorium

• Hoteliers insist on a two-year moratorium
• Demand reduced interest rates of 2% to pay off capitalised interest
• Minimum of six-month waiver for interest payments on loans also requested 
• Urge govt. to re-visit current taxation structure and bring down taxes

By Nishel Fernando

The government has agreed only for a one-year moratorium to support the hotel industry during its recovery period in the aftermath of Easter Sunday bombings, despite the hoteliers’ request for a two-year moratorium on loans taken by the industry. 

During a meeting between hoteliers and Finance Ministry officials chaired by State Finance Minister Eran Wickramaratne last Friday, the government officials informed hoteliers that the government in principle is in agreement with requests forwarded by them in seeking financial relief.

However, the government officials had communicated to the hoteliers that they want to negotiate the terms.

A senior hotelier told Mirror Business that the government agreed only for a one-year moratorium on loans taken by hoteliers, which he termed as unpractical as tourist destinations that were targets of ISIS attacks had a minimum recovery period of two years. 

“Judging by all the other destinations where similar ISIS attacks targeted tourists directly, it takes more than a year for us to get back into the status where we were. We need to have a stable policy on this, because most of our hoteliers have taken huge loans given the industry’s highly capital-intensive nature. Therefore, we have requested for a two-year moratorium. It’s important that the government considers our request,” he elaborated. 

The hoteliers had asked for a range of concessions in a meeting with the President last week. The two-year moratorium was a key request of hoteliers, to be extend to their staff as well. 
Along with the two-year moratorium period, the hoteliers also requested for reduced interest rates of 2 percent to pay off the capitalised interest.

Speaking to Mirror Business, The Hotels Association of Sri Lanka (THASL) President Sanath Ukwatte said that hoteliers also sought a minimum six-month waiver for interest payments on loans, anticipating that the industry would reach some stability in the period. 

“We believe that these travel warnings will continue for a while. Even if travel warnings are removed within next two-three weeks, it will take some time before we see tourists travelling to Sri Lanka,” he said.

The hoteliers point out that forward bookings have almost come to a standstill, following the travel warnings issued by key source countries of Sri Lanka tourism.
Ukwatte remarked that the majority of tourist who come into Sri Lanka through direct and online bookings were backpackers and most of them choose accommodations in the informal sector.

As the occupancy level of hotels keep plummeting to record levels, hoteliers are now preparing to bring down rates in an attempt to lure tourists to the country until travel warnings are softened. 

Hence, hoteliers have asked the government to re-visit the current taxation structure and bring down the taxes, which are around 30 percent of the top line, to an appropriate level during the recovery period.   

Further, according to Ukwatte, THASL is in discussion with airline representatives to offer discounted airfares to tourists for an interim period. 

He noted that airfares contribute to a big chunk of tour packages, thus stressed that it will be crucial to bring down the airfares during this period to attract tourists to the island nation.
Further, the hoteliers had also requested soft loans with around 2 percent interest from the government to manage their operational costs including timely payment of salaries to their employees.

A senior government official said the government is likely to support bank's to provide a moratorium and low interest loans to hoteliers during the recovery period, as the Central Bank had indicated its unwillingness to put all weight on commercial banks. 

Central Bank Governor Indrajit Coomaraswamy is expected to submit a report to a Cabinet Sub-Committee headed by Tourism Minister John Amaratunga on how best the banks could provide financial relief, at its first meeting today. 

Wickramaratne last week through the twitter account announced that the financial relief package for hoteliers will be announced this week. 
Meanwhile, Ukwatte stressed that the only SLTDA registered establishments should receive these financial relief packages while the others who have not registered will have to get registered with SLTDA to benefit from the package.